Landlords must comply with a number of legal obligations, and one of them is to have an Energy Performance Certificate (EPC) for each property they are letting. Those who fail to provide an EPC when required can be liable to pay a £200 fine for each property that does not have one.
What is an EPC?
An EPC for rental property is essentially an official measure of how energy efficient the individual property is. It is expressed as a rating, ranging from a top score of ‘A’ to the lowest possible score of ‘G’.
Another way of looking this is that an EPC gives prospective tenants a reliable basis for comparing different properties and their likely energy bills if they choose to live there. An EPC considers electricity, gas and hot water systems. Clearly, a higher EPC score implies significant potential savings for tenants and it, therefore, gives landlords a competitive advantage.
Since 2018, it has been illegal to rent out a property that has an EPC score lower than ‘E’. Currently, this applies to both new lets and renewals, but it will also apply to existing tenancies from 1st April 2020.
Landlords are obliged to make a copy of the EPC available to prospective tenants as soon as the property is advertised as being available for rent. The EPC must be provided free of charge. In Scotland, there is an obligation to display the EPC in the property itself so that tenants can see it before they commit to any rental agreement.
How to Get an EPC for Rental Property
EPC are issued by certified assessors. A list of accredited assessors can be found on the Ministry of Housing, Communities and Local Government website. For properties in Scotland, landlords can obtain a similar list by contacting the Energy Saving Trust.
Once appointed, the assessor will visit the property to conduct an energy survey. Usually, inspections take less than an hour. The costs vary by the assessor and also depend on the size and layout of the property, but they typically range between £60 and £120.
Amongst other factors, the survey will consider the property’s ability to retain heat, so the assessor will look for things like loft insulation, draught-proofing, the thermal qualities of doors and windows (e.g. single or double glazing) and the insulative properties of walls. Cavity wall insulation or a solid wall insulation system can help to improve a property’s performance in this respect.
The assessor will also look at the way that the property generates and uses energy – which will include features such as boilers and radiators, thermostatic controls and (where they exist) the use of renewable energy systems such as solar PV, solar water heating or air-source/ground-source heat pumps. The inspection will not normally consider the use of cooking equipment or other electrical appliances.
The EPC calculation is based on certain assumptions about typical patterns of energy usage, rather than an analysis of any current occupants’ use of the property. The assessment is designed to be conducted without disturbing tenants’ daily routines. However, landlords will be required to assist the assessor in entering the property and having access to all the features that he/she needs to examine.
It is advisable for landlords to prepare for the assessment visit – e.g. by gathering up any documents, warranties and records relating to items the assessor would not normally be able to see or inspect – such as cavity wall insulation. If the assessor cannot easily inspect a feature, he or she will normally assume it is absent (resulting in a poorer EPC rating) unless the landlord can provide written evidence to prove it has been installed.
Once awarded, the EPC remains valid for a period of 10 years.
How is the EPC Calculated?
The assessment visit results in a score of 1 to 5 stars being awarded to each key element of the building fabric – the walls, roof, heating system and so on. The more efficient the elements, the higher the score – 5 being the highest achievable. Scores are based on a combination of inspection results and assumptions based on the property’s size, usage, construction and age. (As a rule of thumb, more modern properties tend to be more energy-efficient than older ones.) These scores are then fed into government-approved software to produce an overall efficiency rating for the property.
An EPC for rental property does not take any account of the aesthetics, safety, structural integrity or other characteristics of the building. It relates only to energy efficiency, so it is not a measure of the property’s general ‘quality.’
Energy Efficiency Recommendations
Importantly, the EPC usually comes with a set of recommendations for making future energy efficiency improvements. For landlords, these recommendations can be very useful; acting on them may well inspire greater loyalty on the part of tenants, and produce longer term cost savings on issues such as maintenance and general repair. (Warmer, drier properties tend to require less attention than ones subject to condensation, damp and mould.)
Examples of energy efficiency improvements might include:
- Replacing conventional light bulbs with low energy bulbs / LEDs
- Fitting draught excluders and door seals
- Installing loft insulation
- Fitting secondary glazing
- Using effective thermostatic radiator valves
These are relatively low-cost measures that yield short payback periods. More expensive options can still be worthwhile but they will deliver a payback over a longer period. Examples of other useful installations might include:
- An electric shower (as an alternative to a bath that uses hot water from the boiler)
- Energy-efficient double glazing
- Cavity wall insulation / solid wall insulation
- A new central heating boiler
Ultimately, it is a legal requirement to have an EPC for rental property, but an EPC can also be a useful document. Potentially, it can help you to reduce long term costs, to reduce your carbon footprint and to improve the marketability of your property.
If you have any questions about EPCs or more generally about preparing to be a property investor, please talk to one of our professional advisers. Call us today on 01244 343 355.